Coronavirus: Moody’s downgrades Cineworld after site closures
Moody’s has downgraded Cineworld after the cinema chain was forced to close all of its screens across the US and Europe in order to slow the spread of coronavirus.
The two notch ratings downgrade was triggered by the temporary closures, which have been ordered by governments due to the coronavirus pandemic.
Moody’s downgraded the cinema chain from B1 to B3.
Gunjan Dixit, Moody’s vice president and senior credit officer said: “Moody’s adjusted gross leverage for Cineworld was already high at around 5.5x at the end of 2019 and we now expect it to rise towards or above 6.5x in 2020.
“We also expect the company to heavily rely on its revolving credit facility for its cash needs during the year.”
In a note today Moody’s said it “positively recognises the company’s efforts to bring down its
costs as much as possible during the closure period”.
Cineworld is in negotiations with landlords over rental costs and is “hopeful to get a defferal for a significant portion.”
“The company can easily reduce the majority of its staff costs, as a large portion is on temporary pay-rolls,” the credit ratings agency said.
“Moody’s also expects Cineworld to reduce or postpone a portion of its capital expenditure.”
All cinemas have been ordered to shut, along with pubs, restaurants, theatres, clubs and bars.
The government yesterday said all non-essential shops should close, and people should stay home to slow the spread of the virus in the UK and stop it overwhelming the NHS.